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Deep Dive

The Top 5 Startups Supporting Musicians In The Metaverse

With Web3 expected to grow in 2022, more companies are looking to work with artists and the music business — or build a new music business entirely. Here are five companies leading the way.

When non-fungible tokens first entered the public eye, they were largely in the form of digital art — the designer Beeple selling a digital collage for $69 million, or the Bored Ape Yacht Club collection selling its wares for millions at auction. But the concept quickly expanded into other forms of media, and those Bored Apes are now a virtual four-piece supergroup signed to Universal Music’s 10:22PM label. It’s one of the latest examples of how the expanding Web3 universe — which includes NFTs, cryptocurrency and blockchain — is collaborating with the music business to create a new world of opportunities for artists and entrepreneurs.

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That innovation is taking shape in a variety of ways, with new companies cropping up to help artists cater to their superfans and build additional revenue streams. In the Web3 world, concert tickets double as fan-club credentials; albums, merchandise and exclusive content are offered as NFTs; and artists sell stakes in their songs, publishing and other earnings to their fans.

“It becomes a new revenue stream: You have streaming, touring and NFTs, and NFTs will encompass fan experiences and merch as an additional release format,” says Josh Katz, founder/CEO of YellowHeart, an NFT platform that is involved in several different use cases for the music business and helped Kings of Leon become among the first artists to release an album as an NFT in March 2021. “We’re building communities for these artists where they can sell their tickets, put their content out in NFT format and sell direct to the fans and keep all of the money in real time — and have direct communication to their fans.”

With Web3 expected to grow in 2022, more companies are looking to work with artists and the music business — or build a new music business entirely. Here are five companies leading the way.

YellowHeart 
Katz’s company has a bit of a head start on the competition. He founded YellowHeart to curb ticket scalping by creating NFT tickets that, through blockchain, enabled the issuer to track resales and cap prices. A project with Live Nation was shelved when the pandemic hit, but the company has since evolved to include a marketplace for music-related digital art from the estate of Jerry Garcia and Maroon 5, as well as video and music itself.

YellowHeart, which takes a percentage of NFT sales, has also issued artist-centric community tokens that can be distributed at an artist’s show and act as a form of fan club entry or, to use one recent example, a way for Brandi Carlile to gift the 816 fans who redeemed NFTs from her Carnegie Hall show in New York on Nov. 8 — 25% of the audience — with exclusive items and future opportunities for shows and giveaways. “I’m a huge believer in artists’ rights and also fan rights,” says Katz, who helped organize an auction in February with Julian Lennon that sold six Beatles-related NFTs for a total of $158,000. “We’re trying to basically become the non-middleman, where artists can go to their fans and say, ‘Here’s a piece of digital content, and by buying this token you’re entering our community, and through that community we’re going to give you great access to things.’”

Zora 
At first glance, Zora is an NFT marketplace like many others: You can buy a digital illustration of an eye, a GIF of a cat vomiting or a manifesto on the metaverse for as many ethereum tokens as your budget allows. But it’s also an open-source protocol on top of which Web3 platforms can be built, and it has a dedicated outreach system designed to attract the music community. Zora consultants work with artists and creators to identify the best Web3 options for them to build their brands and revenue streams. The platform charges a “gas” fee — the amount of ethereum tokens, or ETH, required to sign up for the service to mint an NFT. (Gas fees are based on ethereum’s price and how busy its servers are at the time the NFT is issued.)

The company was launched by Dee Goens and Jacob Horne, and Brooklyn-based rapper , who has sold 188 NFTs on the platform, serves as artist community lead. She helps educate newcomers on how Web3 works and holds both virtual and in-person workshops and conducts interviews to build a community around the platform. “What I’m trying to do is bring all the fire musicians over and teach them that there’s a new way to be an independent artist and create a new blueprint for yourself,” she says, noting that she has helped teach Sassy Black, Iman Europe and hundreds of other artists how to use the platform, and that they’re free to use any platform they wish. “I think the vision for all of us is to see independent artists thrive and reconstruct the music industry as a whole so that artists can have more leverage in these spaces now.”

Catalog 
A platform built using Zora’s protocol, Catalog is a hybrid marketplace and distributor that helps independent artists navigate both Web2 and Web3 spaces. The company offers tools and support for creators who want to sell NFTs, as well as make sure their songs are on Spotify and Apple Music. Horrorcore rapper Haleek Maul sold one-of-a-kind NFTs of four songs from his latest EP, INNER, on Catalog for 56 ETH — the then-equivalent of approximately $235,000. Fans can also listen to them on the platform. Catalog is still in its early stages, and artists take home 100% of the money they make — minus gas fees — so there isn’t an actual business model in place. But co-founders Michael McKain and Jeremy Stern say that’s not the point. “We saw NFTs as a valuable way for artists to take back ownership of their work and connect with their fans in a way that hadn’t been possible before,” says McKain. “So that’s what we set out to build — we launched in March with about 20 artists, we’re now up to about 300 artists, and we’re over $2.3 million in total sales volume to date.”

Royal
For the past several years, various companies have begun utilizing readily available streaming data and the increased speed of digital royalty payments to engage in fractional licensing, wherein artists, songwriters and producers can put different revenue streams from recordings or publishing rights up for sale, lease or auction. It’s a way for creators to secure a loan or cash infusion through their work, and blockchain technology has opened that frontier even further by allowing for a traceable secondary market in which previous owners can receive a percentage of the resale price. Royal, a startup founded by DJ and crypto pioneer Justin “3LAU” Blau, serves as the marketplace for these primary and secondary music-licensing transactions, and Blau used one of his own songs, “Worst Case,” to establish proof of concept, offering 50% of the track’s royalties to 333 fans who bought in. His success led to a $55 million funding round, which attracted investments from artists The Chainsmokers, Logic and Kygo and talent agencies Creative Artists Agency and WME.

Rapper Nas, who is also a Royal investor and owns the masters to his latest album, King’s Disease II, became Royal’s first major seller in January, when he offered 50% of the streaming royalty rights to the songs “Ultra Black” and “Rare” using a tiered pricing model that ranges from $50 to $9,999. (The higher prices corresponded to higher royalty rates for the buyer.) Blau says Nas’ sale was “proof that artists across genres feel strongly about democratizing ownership of their music and that they want to be connected to their listeners on a deeper level.”

Sound.xyz
A common music-business complaint — and one that has resurfaced since Neil Young and other artists pulled their work from Spotify over the platform’s $100 million podcaster Joe Rogan — is the low per-stream payouts for artists and songwriters on streaming services. It’s an issue that has angered Sound.xyz CEO David Greenstein for most of his professional life, but rather than rail against the system, he built a company that, as he explains it, expands the rights around a song and effectively monetizes fandom to better “capture the full demand for music.” To that end, Sound.xyz has partnered with around 70 crypto-curious artists including Marian Hill, Pussy Riot and Harry Hudson for “listening parties” surrounding new music releases.

Fans buy an NFT that allows them to be among the rare few to comment on a song’s page hosted on Sound.xyz — capitalizing on music lovers’ timeless desire to prove they discovered an artist before the rest of the world. The listening parties generated almost $850,000 for the 70 creators in their first few weeks and resulted in a $5 million funding round led by Andreessen Horowitz. (For now, Sound.xyz doesn’t charge artists for its services or take a commission.) And that’s just the beginning for the company that has been in existence for less than six months, with use cases like NFT-based merch offerings among future possibilities. “The beauty of this is that artists are retaining 100% of their rights and fans are directly supporting artists through their music,” says Greenstein. “This is about valuing music and supporting artists in a fun way.”